Combination of growth, inflation, and risks move panelists’ consensus toward Fed easingWolters Kluwer’s, a financial information service, releases its June Blue Chip Economic indicators. Visit here.
Jun 11, 2019 — NEW YORK, June 11, 2019 /PRNewswire/ — Panelists for Wolters Kluwer’s Blue Chip Economic Indicators June survey anticipate that the Federal Reserve’s Open Market Committee (FOMC) will now cut interest rates, signaling a shift from the panel’s expectations in the May survey for a rise in rates.
This easing of monetary policy comes as panelists downgraded economic growth and indicated that they expect inflation to remain below the Federal Reserve’s 2 percent target for the personal consumption expenditure price index during 2019. Seventy-six percent of panelists indicated that, when a monetary policy change is made, they expect rates to decrease. This is a stark contrast from the 58 percent who expected a rate hike in the May survey.
The current trade conflict is impacting growth forecasts for the U.S. and China. The panelists estimate that the proposed tariffs would dent U.S. GDP growth by 0.2 percentage point this year and 0.3 percentage point next year, while GDP in China would be hurt by 0.4 percentage point this year and 0.5 percentage point next year.
“The combination of growth, inflation and risks has changed expectations for monetary policy,” said Haver Analytics’ Joseph Aguinaldo, executive editor of Wolters Kluwer’s Blue Chip Economic Indicators. “Given the sluggish growth and inflation outlook, it is no surprise that many of our panelists now expect the federal funds rate to be either steady or lower.”
Other consensus findings from the June issue of Wolters Kluwer’s Blue Chip Economic Indicators survey include:
- The Blue Chip Consensus Panel estimates U.S. GDP growth to slow to 1.7 percent in Q2 of this year, with the succeeding quarters projected to be in a range of 1.6 percent to 2 percent. The inflation rate as measured by the CPI is forecasted to be 1.9 this year and 2.1 next year.
- PCE chain price index, the key measure for the Fed, is expected to have the same increases as last month, 1.8 percent this year and 2.0 percent next year.
- Panelists estimate the GDP growth rate in 2020 to be 1.8 percent versus last month’s estimate of 1.9 percent. On a Q4 over Q4 basis, which is a better indicator of the momentum of the economy, the GDP growth rate is estimated to be 2.2 percent in 2019 and 1.7 percent in 2020.
No outright recession is anticipated by the panelists but recession worries have increased with the consensus probability of recession in the U.S. at 22 percent this year and 38 percent next year, up 2 percentage points this year and up 4 percentage points in 2020 versus the May survey.
About Wolters Kluwer’s Blue Chip Economic Indicators
Established in 1976, Wolters Kluwer’s Blue Chip Economic Indicators has become synonymous with the latest in expert opinion on the future performance of the U.S. economy by presenting the forecasts of 50 economists from the nation’s largest and most respected manufacturers, banks, insurance companies, and brokerage firms. The newsletter compiles the experts’ individual and combined forecasts for the current and following year for variables including, but not limited to, real GDP, consumer price index, industrial production, real disposable personal income, pre-tax corporate profits, unemployment rates and real net exports.
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